While impairment of daytime functioning due to poor sleep is often the main determinant for seeking treatment, few studies have examined the clinical impact of insomnia therapies on daytime outcomes. The main objective of this study was to evaluate the impact of cognitive-behavior therapy (CBT), alone and combined with medication, on various indices of daytime and psychological functioning. Participants were 160 individuals with chronic insomnia who received CBT alone or CBT plus medication (zolpidem) for an initial six-week therapy, followed by an extended six-month therapy. Participants treated with CBT initially received maintenance CBT or no additional treatment and those treated with combined therapy initially continued with CBT plus intermittent medication (prn) or CBT without medication (taper). Measures of anxiety and depressive symptoms, fatigue, quality of life, and perceived impact of sleep difficulties on various indices of daytime functioning were completed at baseline, after each treatment stage, and at six-month follow-up. Following acute treatment, significant improvements of fatigue, quality of life (mental component), anxiety, and depression were obtained in the CBT alone condition but not in the combined CBT plus medication condition. Following extended treatment, further improvements were noted for the subgroup receiving extended CBT relative to that with no additional treatment, and for the subgroup receiving CBT and intermittent medication relative to that with CBT but no medication. Improvements were well maintained at the 6-month follow-up. These findings indicate that insomnia-specific therapy is effective at improving daytime and psychological functioning in the short term, and that maintenance therapy produces an added value to optimize long-term outcomes.